Delhi hotels may be allowed to build and sell flats to raise funds

DELHI: The government is planning to allow hotels to build and sell apartments in their complexes in Delhi, a move that may benefit several hotels in the city except those that fall within the restricted Lutyens' Bungalow Zone.

Hotels will be allowed to use the 20% of the total built-up space, where they are permitted to set up a commercial and retail wing, to develop apartments, a senior official at the Delhi Development Authority said, on the condition of anonymity. "The government's move will significantly reduce the initial capital requirement for hotel projects. Hotel developers will be able to utilise the funds available through residential pre-sales to offset the level of debt funding," said Siddharth Thaker, managing partner at Prognosis Global Consulting. New and existing hotels will also benefit by way of improved ROIs and breakeven on initial capital investment will be shortened, he added.

The permission to build and sell apartments could benefit several older hotels such as the Hyatt Regency, The Grand, Qutab Hotel, The Lodhi and The Leela Palace. However, the concession will not apply to the Taj Mahal, Shangri La, Le Meridien, The Oberoi, Taj Palace, ITC Maurya and Claridges, all of which are in the Lutyens' Bungalow Zone.

The move is expected to push hotel owners and developers to bring in the globally popular concept of branded residences, which is catching up in many Indian cities as well, with a number of international brands such as Four Seasons, Hyatt, Starwood Group and domestic players such as Leela tying up with partners. Owners of these residences, which are attached to the hotel, will be able to use all the facilities that a hotel offers, including daily housekeeping, dedicated concierge and a 24-hour room service, spas, restaurants and banqueting facilities.

The Leela Palace in Chanakyapuri, for instance, has not utilised the additional FSI (floor space index) that DDA had given to hotels in 2008 to help add more rooms in anticipation of the rush of tourists for the Commonwealth Games. At the time, the FSI was increased from 1.5 to 2.25. The hotel will now be able to use a part of this extra FSI to build apartments, which will be more commercially viable.

The Qutab Hotel already houses 30 apartments that have been given on lease. Similarly, Hyatt Regency Delhi has recently built a tower, utilising a part of the FSI available to it. The tower, called the Hyatt Regency Delhi Residence, is expected to offer one, two and three-bedroom serviced apartments on lease when it opens later this year. When the new rules come into force, the hotels will have the option to sell these apartments.

Hotels will be allowed to use the 20% of the total built-up space, where they are permitted to set up a commercial and retail wing, to develop apartments, a senior official at the Delhi Development Authority said, on the condition of anonymity. "The government's move will significantly reduce the initial capital requirement for hotel projects. Hotel developers will be able to utilise the funds available through residential pre-sales to offset the level of debt funding," said Siddharth Thaker, managing partner at Prognosis Global Consulting. New and existing hotels will also benefit by way of improved ROIs and breakeven on initial capital investment will be shortened, he added.

The permission to build and sell apartments could benefit several older hotels such as the Hyatt Regency, The Grand, Qutab Hotel, The Lodhi and The Leela Palace. However, the concession will not apply to the Taj Mahal, Shangri La, Le Meridien, The Oberoi, Taj Palace, ITC Maurya and Claridges, all of which are in the Lutyens' Bungalow Zone.

The move is expected to push hotel owners and developers to bring in the globally popular concept of branded residences, which is catching up in many Indian cities as well, with a number of international brands such as Four Seasons, Hyatt, Starwood Group and domestic players such as Leela tying up with partners. Owners of these residences, which are attached to the hotel, will be able to use all the facilities that a hotel offers, including daily housekeeping, dedicated concierge and a 24-hour room service, spas, restaurants and banqueting facilities.

The Leela Palace in Chanakyapuri, for instance, has not utilised the additional FSI (floor space index) that DDA had given to hotels in 2008 to help add more rooms in anticipation of the rush of tourists for the Commonwealth Games. At the time, the FSI was increased from 1.5 to 2.25. The hotel will now be able to use a part of this extra FSI to build apartments, which will be more commercially viable.

The Qutab Hotel already houses 30 apartments that have been given on lease. Similarly, Hyatt Regency Delhi has recently built a tower, utilising a part of the FSI available to it. The tower, called the Hyatt Regency Delhi Residence, is expected to offer one, two and three-bedroom serviced apartments on lease when it opens later this year. When the new rules come into force, the hotels will have the option to sell these apartments.

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